Groupon Stock Super Slumps, as Merchants Express Skepticism

Groupon Inc (NASDAQ:GRPN) shares seem to have hit a barrier on their way up, and consequently, taken the reverse direction, amid survey findings that indicate a lot of skepticism among its merchants. The Illinois based internet based company engages in the business of lining merchants to customers, and hence the former determine how good a going concern Groupon Inc (NASDAQ:GRPN) is as they are the main source of income.

However, according to a recent survey, the company is not faring very well in its business. Despite the fact that a majority of the 100+ merchants participating in the survey considered Groupon Inc (NASDAQ:GRPN), only second to Living Social, the overall perception was not all that impressive.

The most important statistic, which is the ability to retain customers, was poor, with only about 2% indicating that at least 50% of their customers were repeat customers. In the current business, environment, merchants would want to hold on to their customers and build customer loyalty. Some of you might be wondering whether this fault should be attributed to Groupon Inc (NASDAQ:GRPN) , or the respective merchants for failing to hang on to their customers.

First scenario: It would be right to argue that Groupon Inc (NASDAQ:GRPN), is actually helping its customers (Merchants) in the sense that, the same survey indicates that more than twothirds of the surveyed population were either satisfied or very satisfied with the number of customers they got through Groupon. Additionally, at least 39% were satisfied with quality, while 24% remained indifferent. Therefore, this is a clear indication that the company offers a real resource for customers.

However, the ability of the merchants to hold on to their new customers is pinned on to them, as customers are likely to stick to your products and services if they feel that whatever they are getting has value for their investment. This would, therefore, mean that, the repeat customer rate is irrelevant to Groupon’s effectiveness.

Second Scenario: Holding first scenario constant, what else would put-off customers from buying from Groupon merchants? The first assumption would be a rigorous process, perhaps time consuming, with a lot of bureaucracy. Luckily, this does not appear anywhere in the survey as an assessment item. So what about the fees levied on their transactions? This perhaps could be a major issue; that causes customers to come and go, once they get hit by the high fees.

Or, is it that Groupon customers (Customers) are the type that cannot be trusted for loyalty? Perhaps, so, and even the surveyed merchants couldn’t be more pessimistic regarding their buying habits, with a huge majority, more than twothirds indicating that the habits were either lower or significantly lower, compared to their normal customers.

So, is it worth selling through Groupon? I guess a majority of the merchants would be eager to answer me; NO. as exhibited in the tally for Return On Income (ROI), which showed that 58% would opt for Living Social as compared to Groupon.

But Groupon is not all that bad; actually, it gained more preference, as compared to internet search Ginat Google Inc (NASDAQ:GOOG), and Yelp Inc (NYSE:YELP).

Finally, while a whole cloud of skepticism among merchants seems to be creating a gigantic shadow against Groupon’s performance, being second best in regard to customer preference is not always bad, especially, if you are not operating in a duopoly market. Groupon still has a chance of trying to recoup all that lost value from its IPO price. Unfortunately, merchants are impatient, as they too are trying to keep pace with the dynamism in the market, while more affordable firms (in terms of fees and commissions) are taking charge.

This is perhaps the reason why, Ken Sena of Evercore Partners, has rated the Groupon Inc (NASDAQ:GRPN) stock as sell, attaching a price target of just $3.00 per share. As at the time, of this writing, Groupon shares were up $0.06, or 1.23% to trade at $4.81 per share.